Could the Sidetree decentralized identity protocol enable both privacy and personalization? 

I am a bit of a privacy nut. I don’t like being tracked and I don’t like anybody else controlling my identity. Yet I know that being tracked can create personalized services that are useful to me. That is why I am a fan of decentralized identity on the blockchain. (see Part 3/Chapter 6 of The Blockchain Economy digital courseware for more on how decentralized identity on the blockchain will disrupt today’s media business).

Today we give up our privacy/identity to Big Tech/Media and that is a massive business for them. So, as a media entrepreneur in a niche domain (Fintech) I want to understand how one can make money if identity is decentralized and under user control. I think keeping advertising to contextual (avoiding all tracking technology) is part of the answer, but users want personalisation (and the networked community enabled by personalisation) and that requires access to identity.

This got me to  look at the Sidetree approach to decentralized identity to see if it could be win/win ie for both users and media owners. The Sidetree basics:

“Sidetree is a protocol for creating scalable decentralized public key infrastructure (DPKI) networks that can run atop of any existing decentralized ledger system (e.g. Bitcoin) and be as open, public, and permissionless as the underlying ledger they utilize. The protocol allows users to create globally unique, user-controlled identifiers and manage their associated metadata, all without the need for centralized authorities or trusted third parties. The syntax of the identifier and accompanying data model used by the protocol is conformant to that defined by W3C Decentralized Identifiers. Implementations of the protocol can be codified as their own distinct DID Methods and registered in the W3C DID Method Registry.”

The big questions are:

  • Could a Big Tech company control the Sidetree protocol through some embrace, extend, extinguish strategy? This has happened in the past and it is a risk because the only way to scale Bitcoin and Ethereum is to user Layer 2 networks (such as State Channels, Sidechains, and Bitcoin’s Lightning Network), typically run by Big Tech. Decentralized identity systems on Layer 1 is easy to do but fairly useless. It is possible that Big Tech cannot control the Sidetree protocol because it is all open source. Developers who object to a Big Tech control could easily fork Sidetree. 
  • Is there a simple way for entrepreneurs to make money using Sidetree? At the lower levels of the stack, developers can create  things like chain-specific adapters, but it is unclear how they would make money from that.  I am more interested in services that ordinary people will want at the top of the stack (see below). For application developers to build these there must be a REST API. There is.
  • What sort of private personalised services will people want? The mass market  will be in areas where users really value privacy, such as money and healthcare.  The entry market maybe among people with a lot of money and influence who value their privacy highly.

Disclosure: I own some shares in Microsoft, which is building a Layer 2 network for Bitcoin using the Sidetree protocol.

Bernard Lunn is Editor and CEO of Daily Fintech and author of The Blockchain Economy

Daily Fintech’s original insight is made available to you for US$143 a year (which equates to $2.75 per week). $2.75 buys you a coffee (maybe), or the cost of a week’s subscription to the global Fintech blog – caffeine for the mind that could be worth $ millions.

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